With Russian troops laying siege to Ukraine’s two largest cities, I certainly don’t blame financial markets for a high degree of anxiety. After all investors and traders are also looking at the consequences of massive sanctions piled on Russian banks including the country’s central bank, disruptions of the global grain trade, and energy shortages here, there, and everywhere.
Today March 1, at the close in New York, the Standard & Poor’s 500 was down 1.55% and the Dow Jones Industrial Average had dropped 1.76%. The NASDAQ Composite was lower by 1.59% and the small cap Russell 2000 had given up 1.93%. The iShares MSCI Emerging Markets ETF (EEM) was down 1.33%.
You can see the flight to safety in the CBOE S&P 500 Volatility Index (VIX), which measures the prices that traders and investors are willing to pay to hedge against volatility. The VIX was up 10.51% to 33.32.
And in the huge drop in Treasury yields as investors and traders bought up these safe-haven bonds. The yield on the 10-year Treasury fell 8 basis points to 1.75% and the yield on the 2-year Treasury dropped to 1.38%. On Friday, February 25, the yield on the 10-year Treasury was 1.96% and on the 2-year 1.58%.
Stocks were down yesterday too with the S&P 500 off 0.24% at the close and the Dow down 0.49%.
But the selling today is fundamentally different (as well as being greater). Yesterday some themes drove some stocks higher. (The NASDAQ Composite was up 0.41% on the day.) Besides cybersecurity stocks, the market also saw a big rally in alternative energy stocks with lithium producer Albemarle (ALB), for example, up 2.05% and solar equipment maker SolarEdge Technologies (SEDG) rocketing upward by 14.93%.
Today you can still find some green in the cybersecurity sector–CrowdStrike (CRWD), for instance, closed up 1.24% after being ahead 4.18% at 12:30 p.m.
But yesterday’s green in alternative energy stocks has turned to red. Albemarle tumbled 4.82%.
Some of the selling is an attempt to gain shelter from the Russia war and sanctions storm. Airlines stocks, which will take a hit from higher prices for jet fuel and any drop in the appetite for flying, are down with American Airlines (AAL) off 5.57% at the close and United Airlines (UAL) lower by 5.74%.
Some of the selling seems a reasonable guess at where there might be problems. U.S. banks are down heavily even though various experts say they have little or no Russia exposure. JPMorgan Chase (JPM) was down 3.77% and Bank of America (BAC) was off 3.91%.
But some of the selling is just selling, either to reduce risk or to raise cash, without any specific connection to Russia and the Russia sanctions. Tesla (TSLA) was down 0.70% at the close and construction aggregate producer Vulcan Materials (VMC) was significantly lower by 3.86%. Think U.S. states are going to spend less on roads because of sanctions on Russia’s central bank?
I think raising cash here is a good idea because we will be looking at some decent bargains whenever the war and the sanctions are over (or at least when the effects are clearer.) And if you have profits in some sectors with a clear exposure to the global chaos, I’d take those profits.
I wouldn’t–yet–go in for indiscriminate selling. A drop of 4.98% in Ford Motor (F) today, for example, seems excessive.
I’m no bargain hunting today. I think the siege of Kyiv is likely to be shockingly brutal and nasty. And I haven’t quite forgotten that the Fed meets on March 16 and the bank will almost certainly raise interest rates.
